AMR poised to spin off its regional jet operation

AMR, the parent company of American Airlines, has indicated about its plans to shed its American Eagle regional airline unit. (11/30/2007)

AMR, the parent company of American Airlines, has indicated about its plans to shed its American Eagle regional airline unit. (11/30/2007)

The announcement comes a month after American revealed for the first time that it was studying options for American Eagle; its frequent-flyer programme, AAdvantage; its maintenance and repair arm; and American Beacon Advisors, an investment management firm. The airline is working with advisers, including Rothschild, to evaluate plans for each division.

According to a media report, the development emerged as an investor group called on the company to bolster its stock price by getting rid of some operations. AMR is also studying whether to shed other operations, including its big frequent-flier programme, a money-management operation and even some maintenance operations, Thomas W. Horton, Chief Financial Officer, said in an interview. He said no decision on those had been made.

American Eagle employs more than 13,000 workers, operates about 300 planes and makes about 1,700 flights a day. AMR said the regional operation expected 2007 revenue of about $2.3 billion; AMR´s total for 2006 was $22.6 billion.

"Mr. Horton would not say if American Eagle was profitable," reported nytimes.com.

The unit flies mostly smaller jets that feed passengers from smaller cities to American hubs in Dallas, Chicago, Miami and elsewhere.

AMR said the divestiture could come as a spinoff to its shareholders or as an outright sale of American Eagle. In addition to other regional airlines that might want to expand through a purchase, private equity firms might be attracted to the business, according to Roger King, an analyst at CreditSights, in the same report. That is because regional airlines typically have long-term contracts to supply service to bigger carriers, which could be a steady source of revenue to service debt taken on to finance a purchase.

Among the others, United Airlines´ parent UAL is also talking about spinning off its frequent-flier programme and aircraft maintenance operations, while possibly maintaining a stake in the operations.